The study does not raise pardons but postponement of payments and interest reduction
Portugal can reduce its debt from the current 130.7% to 91.7% if payments are postponed to 60 years and interest is reduced to 1%. The plan is not of the Government, reluctant to any unilateral initiative, but its socialist party and the Left Block, which supports it in parliament.
The Government does not want to hear about debt restructuring, but it nevertheless gave permission to set up a parliamentary committee to study a reduction plan. It was not his initiative, but a demand of the Left Bloc in exchange for giving him parliamentary support for the entire legislature. After a year of meetings, the plan is completed and sent to the Government.
In short, the study to restructure debt is based on not touching the debt that affects private funds and the IMF. For the rest, payments would be extended from the current average 15.6 years to 60, and interest rates would fall from the current 2.4% on average to 1%.
Apart from the measures that depend on negotiations with third parties, the working group presents four that are of full power of the Government: a reduction of the provisions of the Bank of Portugal, which the Government considers excessive and with which the State would have more annual dividends ; An advance payment to the IMF, which has the highest interest loans; The optimization of state deposits and the reduction of the average duration of debt issued. Altogether, the application of these measures would save the state 451 million this year (0.20% of GDP) and 2,788 million in 2022.
To conciliate the speeches of the ruling socialist party and the vociferous Left Bloc (NATO exit, debt forgiveness …), the language of study measures every word; For that reason it is not a plan, but “merely an example of the type of restructuring that would be possible”, but also warns that to continue with the current level of debt will have to increase taxes or reduce social services.
The plan would only be activated in a joint negotiation within the European Union
By virtue of this balance between the different forces that make up the working group, at no time does the debt forgiveness of part of the debt be considered, “nor would it be a breach, but would be done in agreement with the European partners.”
Reactions to the plan have not been delayed. The Government completely disassociates itself from it, although its deputies by have participated to the undersecretary of finance, and the PC, the other party that supports the Government in Parliament, calls it “micropopuestas”, with solutions “equal to others” Do not respond to the “deep problems”, according to deputy Paulo Sá. Reactions expected, because the PC was not going to applaud an idea of the Left Block, its electoral competition.